WHAT WE'RE LOOKING AT
Big, expensive mutual funds. Are they earning their prodigious fees?
Just two qualifications were needed to make today's list. The first was size - only funds with assets of more than $1-billion were included. The second was a management expense ratio above 2.5 per cent, which is quite hefty when you think about it. Imagine grossing 10 per cent in a fund and then having 2.5 per cent taken off the top (fund returns are reported on an after-fee basis, just FYI). You've just lost one-quarter of your gains.
To provide some perspective on the performance of today's funds, one-, three- and five-year quartile rankings have been included. Quartiles divide funds in a category by their returns - first quartile is best, fourth is worst.
WHAT WE FOUND
Think of this edition of the Number Cruncher as an informal investigation into the concept of economies of scale. In mutual fund terms, it suggests that large funds should be cheaper than small funds because they have a larger base of assets over which to spread their costs. Put another way, each unitholder theoretically carries a lighter fee load.
Economies of scale are enjoyed by unitholders of some mega-funds that do not appear on today's list. Take RBC Monthly Income, for example. It's the seventh-largest mutual fund in the land with assets of $7.2-billion and its MER is 1.14 per cent, which compares to an average of 2.42 per cent for its peers in the Canadian neutral balanced category. You could double the cost of owning RBC Monthly Income and it still wouldn't make the cut for today's screen.
Funds have to be big and pricey to make this list, with no apparent economies of scale for investors. What's this mean to their returns? In some cases, like AGF Global Value, high fees and lower-echelon performance go together. In others, as with Investors Retirement Growth Portfolio-A, high fees haven't impeded performance. Oh, wait. Globeinvestor.com shows that the older C version of Investors Retirement Growth Portfolio delivered below-average returns in the 15- and 20-year periods to March 31.
Own some big funds? See if you're benefiting from an economy of scale in terms of the fees you're paying. Remember, big funds can afford to be reasonable on fees.
Excel Funds has provided updated information on the fees that were listed for several of its funds in the Number Cruncher chart on April. 27. The management expense ratios for Excel India, Excel China and Excel Chindia are 2.98, 3.19 and 3.34 per cent, respectively.
|Funds with assets greater than $1-billion, MER greater than 2.5%|
|Fund Name||Category||Assets ($-Mil)||MER||Quart 1-yr||Quart 3-yr||Quart 5-yr|
|Investors Retirement Gwth. Port.-A||Canadian Focused Equity||1,017.3||2.84||1||1||1|
|AGF Global Value||Global Equity||1,307.7||2.81||3||4||4|
|Sprott Canadian Equity||Natural Resources Equity||1,406.0||2.81||4||3||3|
|IA Clarington Canadian Dividend||Canadian Dividend and Income Equity||1,166.8||2.72||3||2||2|
|Investors European Equity-A||European Equity||1,002.1||2.69||4||2||3|
|Investors Global-A||Global Equity||1,564.8||2.69||2||1||1|
|Investors U.S. Large Cap Value-A||U.S. Equity||1,882.2||2.69||2||2||2|
|IG FI Canadian Allocation-A||Canadian Equity Balanced||1,581.9||2.68||3||1||1|
|IG Mackenzie Maxxum Dividend Gro-A||Canadian Dividend and Income Equity||1,019.1||2.68||2||4||4|
|Investors Canadian Balanced-A||Canadian Equity Balanced||1,690.6||2.68||1||1||1|
|Investors Canadian Equity-A||Canadian Focused Equity||2,438.6||2.68||1||3||3|
|Investors Cdn Large Cap Value-A||Canadian Focused Equity||2,880.2||2.68||1||1||1|
|Investors Dividend-A||Canadian Equity Balanced||13,249.4||2.68||1||3||2|
|Investors Mutual of Canada-A||Canadian Equity Balanced||2,386.3||2.68||3||3||2|
|Investors Summa SRI FundTM A||Canadian Focused Equity||1,287.5||2.68||1||3||3|
|Allegro Moderate Portfolio-A||Global Equity Balanced||1,282.2||2.65||4||1||2|
|Desjardins Overseas Equity Value||International Equity||1,033.2||2.58||2||4||3|
|Brandes Global Equity||Global Equity||1,409.5||2.57||4||4||4|
|Investors Real Property-A||Miscellaneous||3,348.8||2.56||4||2||2|
|Investors Retirement Plus Port.-A||Canadian Neutral Balanced||1,314.5||2.56||2||1||1|
|AGF Canadian Balanced||Canadian Neutral Balanced||1,300.5||2.55||4||3||1|
|TD Mgd Aggress Growth Port-I||Global Neutral Balanced||2,241.1||2.52||2||4||4|
|Trimark Select Growth||Global Equity||1,956.7||2.52||4||4||4|
|Source: Globe Investor|
© 2007 The Globe and Mail. All rights reserved.
Only GlobeinvestorGOLD combines the strength of powerful investing tools with the insight of The Globe and Mail.
Discover a wealth of investment information and and exclusive features.